Saturday, February 27, 2010

The U.S. Postal Service had something in December it hasn't seen in a long time -- a profitable month.

The Postal Service had net income of $179 million for the month, it revealed in a report filed yesterday with the Postal Regulatory Commission. The USPS had more mail volume (9%) and revenue (6%) than budgeted, but lower expenses (-2%), enabling it to beat its budget by $546 million.

Holiday-related mail usually makes December one of the Postal Service's best months, but the USPS lost $185 million even in December 2008. The differences this year were a lower cost structure and higher labor productivity: Total work hours were 7.6% lower than in December 2008 even though mail volume was down only 3.2%.

The Postal Service is still on track to lose billions of dollars this year, mostly because of a mandated subsidy to the federal government (euphemistically referred to as prepayment of retiree health benefits). But the first three months of Fiscal Year (2010) are much better than budgeted and even a bit better than last year, despite a drop in mail volume of nearly 9%.

The USPS has managed to keep its expenses slightly under budget so far, despite mail volume running nearly 5% higher than planned. That has resulted in a quarterly loss of "only" $297 million in the quarter, nearly $1 billion better than the budget.

The recent results disprove the notion that higher postage rates are the only way to balance the Postal Service's budget. That would only drive away business without decreasing costs much.

A better path is to reduce fixed costs with early-retirement incentives and facility consolidations. Postal officials have mostly followed that path, though the early-retirement bonuses have been too small and the pace of consolidations too slow.

Friday, February 26, 2010

The U.S. Postal Service is installing Flats Sequencing System machines at a rapid pace but is still overhauling the schedule for future installations.

Only 11 of the massive machines are up and running, which is about eight months behind the early-2009 schedule for the system that is supposed to revolutionize the handling of catalogs, magazines, and other flat mail. But another 39 installations will be complete by the end of July, postal officials said at last week’s MTAC (Mailers Technical Advisory Committee) meeting.

That would put the program less than six months behind the original schedule. But what happens after July isn’t clear.

The USPS is committed to buying another 50 Phase I FSS machines from Northrop Grumman, but its installation schedule for those machines has been “under development” since August, when postal officials announced a reworking of the Phase I plan in response to declining flats volumes.

One participant in a mailing-industry tour of the Northrop Grumman manufacturing facility last month described it as “all dressed up and no place to go,” waiting on the USPS to decide on a smaller version of the football field-sized machines that is more suited to lower volumes.

Thursday, February 25, 2010

AbitibiBowater stunned its customers today by announcing a huge price increase for coated paper – a move that is already DOA, thanks to Abitibi’s competitors.

The announcement says simply that prices for all coated groundwood papers, from standard #5 to high-brightness #4, will increase by $60/ton ($3/cwt.) on April 1.

A couple of months ago, low inventories and an economic recovery caused mills and prognosticators to talk about a possible increase in coated prices this spring. Manufacturers predicted that the expiration of black-liquor subsidies would cause paper machines (usually, someoneelse’s paper machines) to be shuttered. Some coated mills were unseasonably busy early this year as customers restocked their depleted inventories in advance of price increases.

But machine shutdowns never happened, the shaky economic recovery has mostly bypassed print advertising so far, and spot prices started drifting lower rather than higher.

Hopes for a price hike any time soon were pretty well dashed in the past week as word got out that the largest coated supplier, NewPage, had restarted two mothballed machines. So much for a tight market.

Then #2 Verso bragged to stock analysts yesterday that it “enjoys a distinct manufacturing cost advantage vs. its competition” in its “key product areas” – ultralightweight coated #5 (ULWC) and coated freesheet #3. Verso's presentation included a chart that shows it having a $567 cost per ton to make ULWC, versus a $634 average for the competition.

Between the two of them, NewPage and Verso have a bit more than a 50% share of both the coated-groundwood and coated-freesheet markets in North America. A significant price increase can’t get rolling without a significant push, and perhaps a loss of market share, by one of these leaders.

Verso executives told the analysts they would continue to “take market related downtime to match demand with supply” and to develop new products rather than dropping prices to keep their machines full. But with its apparent low-cost position, Verso seems unlikely to shut down capacity in hopes of driving up market prices.

And NewPage, which single-handledly propped up the coated market a couple of years ago by shutting down high-cost machines and mills, is clearly no longer up to the task of providing such market leadership. It lost $308 million last year despite receiving $304 million in black-liquor subsidies, which it won’t enjoy this year.

Restarting the two machines seems to be a sign of desperation for NewPage, paper-market analyst Verle Sutton pointed out this week. The heavily indebted company may be “running for cash” so that it doesn’t end up joining AbitibiBowater in Chapter 11 bankruptcy reorganization.

And what about coated freesheet? Next week’s decision on the anti-dumping case against some Chinese and Indonesian mills might boost the North American market. (The European Union launched a similar probe last week. Two of the the complainants -- Arjo Wiggins, known as Appleton Coated in the U.S., and SAPPI -- are also involved in the U.S. case.)

But Verso claims an average cost advantage of $61 per ton for coated freesheet, including a whopping $284-per-ton advantage against two competitors. It will be in no hurry to shut down profitable machines. And struggling NewPage has a huge 40% share of the North American coated-freesheet market.

Wednesday, February 24, 2010

Exactly 30 days ago, I chided The New York Times for implying that White Birch Paper was on the verge of bankruptcy.

White Birch, North America's second largest newsprint manufacturer, filed for bankruptcy protection in both Canada and the United States today.

"If White Birch survived 2009's record decreases in U.S. newsprint prices, why would it go under now that things are looking up?" I wrote a month ago. The answer is apparently that White Birch took on so much water in 2009 that the recent recovery of newsprint prices was too little and too late to keep the ship afloat.

The privately held company said today it would continue operating while it seeks court approval for $140 million in debtor-in-possession financing from some of its lenders. That should provide it "more than adequate liquidity during the restructuring," which is "about fixing our capital structure," the company's news release said.

The Chapter 11 filing will fuel more gossipy articles about White Birch owner Peter Brant's messy and very public divorce from ex-supermodel Stephanie Seymour. New York magazine, for example, reported today that some of Brant's neighbors speculate that "the impish playboy polo player" is using the White Birch reorganization as "a ruse to hide divorce assets."

The 41-year-old Ms. Seymour, however, has not been hiding her assets. She recently showed just about all of them in a racy Vanity Fair spread. And how does she look after years of retirement and marital non-bliss? Let's just say she has better prospects for making money from modeling, whether avec or sans clothing, than her soon-to-be-ex does from making newsprint.

Monday, February 22, 2010

The Obama Administration announced today that it wants to close the non-existent "Son of Black Liquor" loophole to help "pay" for new healthcare legislation.

A few hours later, Senate Democrats won a key vote on jobs legislation that, in some versions, would be paid for partly with the "savings" from closing the same mythical loophole.

Meanwhile, the watchdogs of the news media acted more like lapdogs, taking Administration and Congressional statements at face value without bothering to check the facts. For example, a New York Times article on Obama's proposal states flatly, and falsely,: "Rescinding the 'black liquor' tax credit could generate as much as $24 billion in revenue over 10 years, helping to pay for a chunk of the health care legislation."

"Current law provides a tax credit for the production of cellulosic biofuels," notes the Obama Administration's summary of its new healthcare bill. "The credit was designed to promote the production and use of renewable fuels. Certain liquid byproducts derived from processing paper or pulp (known as 'black liquor' when derived from the kraft process) were not intended to be covered by this credit. The President’s Proposal adopts the House bill’s policy to clarify that they are not eligible for the tax credit."

As Dead Tree Edition has explained previously, black liquor is already ineligible for the Cellulosic Biofuel Producer Credit program, so there is no loophole to close. No money has been budgeted to provide such credits for black liquor, so there is no savings to be budgeted for healthcare, creating jobs, or anything else.

Only in Washington would people try to use the same fake money to pay for two different programs.

Saturday, February 20, 2010

The Postal Service released final “droop” regulations this week that give small newspapers a break but are otherwise full of problems for mailers of catalogs, magazines, and other flat mail.

The rules, which are to be fully implemented Oct. 3, will be an especially hard blow to tabloid-sized publications and to skinny magazines, catalogs, and retail flyers. And they might prove to be a hindrance for co-mail operations – which postal officials have touted as an ideal way to reduce both mailers' and Postal Service costs.

The regulations will impose a significant penalty on mail that fails a new flats deflection test, commonly referred to as the droop test, which is supposed to determine whether mail is well suited to the Postal Service’s sortation equipment.

The Postal Service received comments from 35 associations, businesses, and people regarding the proposed regulations – and ignored almost all of them. One exception is that copies in carrier-route bundles delivered to a destination delivery unit (DDU) are exempted.

That change was in response to claims that the regulations would impose a 78% price increase for some In-County Periodicals mailers – and an acknowledgement that the penalties make no sense for copies that are sorted manually. It seems to help mostly small local newspapers. The national dropship networks run by the major printers of magazines and catalogs rarely deliver to DDUs, which is where letter carriers are based.

Among the problems the Postal Service didn’t fix are:

Carrier-route copies: Except for DDU deliveries, copies in carrier-route bundles are not exempt from the penalties. Even some postal officials had said carrier-route copies would be exempted, because in theory a carrier-route bundle bypasses sortation equipment and goes directly to a letter carrier. The Postal Service did not explain its logic (or illogic) on this point, but it may have to do with copies being handled on Flats Sequencing System machines. So much for the promise that FSS would save mailers money.

Objective test method: “We are making modifications to improve the objectivity of the testing process,” the Postal Service says in its explanation of the revisions, but it failed to address many concerns. For example, there is no language regarding how a piece is to be handled prior to testing (which can make a huge difference as to how much it droops), when in the process it should be selected for testing (prior to bundling or pulled out of a bundle?), or how many pieces in a mailing should be tested. A cantankerous postal clerk could put a printing plant out of business, while an easygoing one could give the printer a competitive advantage.

Pre-qualification: Many mailers asked for a way to pre-qualify samples of a mailing rather than producing an entire mailing before discovering that mail pieces fail the droop test. The USPS rejected that, as well as related calls for tolerances of up to half an inch or a certain percentage of failed copies. As a result, although normal magazine-sized pieces can droop up to three inches, mailers would be wise to build in a safety factor and not produce anything likely to droop much more than two inches.

Co-mail: “We are developing a random sampling procedure to test mailings of nonidentical pieces, including comailed and copalletized mailings,” the USPS explanation says -- but the regulations themselves say nothing about such a process. Cataloguers and publishers that co-mail are concerned that, even if all of their copies meet the standard, they will be penalized for the failings of another co-mail participant’s copy failure. Because printers typically select and presort magazines and catalogs for co-mail before production starts, they will probably exclude anything that has a remote chance of failing the droop test.

The Cost of Droopy Flats: Joe Schick, Quad/Graphics' postal guru, discusses how difficult it is to predict whether a mail piece will fail the droop test when it's still in the design phase and says the new regulations could mean a 40% postage increase for some mailers.

Thursday, February 18, 2010

A prominent environmental commentator is accusing the USPS of greenwashing for including the claim "made from 100% recycled pixels" on its USPS.com/green web site.

The web site commits two of the "Seven Sins of Greenwashing" -- no proof and vagueness, writes Gail Nickel-Kailing, managing editor of the Going Green blog for WhatTheyThink.com, a news service for the printing industry. The claim "is so poorly defined or broad that its real meaning is likely to be misunderstood by the consumer," she wrote this week.

Methinks the reference to "recycled pixels" is supposed to be a joke, perhaps the Postal Service's way of pointing out that most mailed items (e.g. letters, catalogs, magazines) are more recyclable than their electronic counterparts.

Some references to recycled pixels on other web sites seem to refer to the re-use of photos or graphics. Others are a sort of mock greener-than-thou claim; my favorite: "Made from 100% post-consumer recycled pixels. Only organically grown free-range pixels were used on this web page. No pixels were harmed during the making of this web page."

Graphic Arts Online ran an April Fool's announcement last year from a faux digital-imaging company proclaiming that it was recycling pixels, AKA "Pixel Dust", which it "collected from the filters of . . . digital imaging devices." Along with some hilarious technical data is this admonition: "Please do your part! If we all start recycling pixels, an amazing amount of numerical digits will be saved (pixels are stored as numeric values). Numbers are a non-renewable resource, and although they may seem infinite, the prime numbers can never be used again."

Though the Postal Service's claim, or humor, may be off target, its green efforts -- such as recycling 274,000 tons of material in 2008, testing electric and alternative-fuel delivery vehicles, and becoming the first federal agency to publish its carbon footprint -- are worthy of note.

But when is the Postal Service going to get with it and start using post-consumer recycled pixels?

“Postal acceptance personnel inducting Intelligent Mail barcode mailings need training and familiarity with new Intelligent Mail barcode mailing procedures," Bennett writes. (Articles on Intelisent's Postal Affairs Blog point out that the USPS's recent directive not to cross out the IMb on misaddressed mail is sometimes unworkable and conflicts with other instructions from the Postal Service.)

The Postal Service has no method of testing whether "software vendors are correctly producing and embedding data in the Intelligent Mail barcode," Bennett writes. "With 'anything goes' data permitted in the Routing Code, even addresses failing the ZIP+4 DPV encoding process produce an Intelligent Mail barcode that appears to be perfectly acceptable."

"Mailers will need to spend money to participate in the Full Service Intelligent Mail program, and it provides them with no ROI benefit," the paper says. Among the costs are new or enhanced software to produce the barcodes, purchase and licensing of Mail.dat software, and payments to vendors (or more software) to interpret Intelligent Mail data. (A publisher told me that a fulfillment company charges his company $1 per thousand to add full-service IMbs to mailing files. Guess what the Periodical discount is for full-service IMb: $1 per thousand.)

For full-service IMb, postage statements must be submitted through the Postal Service's clunky and unreliable PostalOne! website. That site was out of service for five days earlier this month, which significantly increased the cost of preparing mailings, Bennett writes. Both the USPS and mailers are still digging out from the resulting mess.

"Several mailers are experiencing hours of processing time to submit electronic files," Bennett reports. "The USPS has released no information regarding its computer capability upgrades to handle the volume" and has no "real contingency plan" for outages.

Related articles:

The Postage Discount No Mailer Wants: Why the IMb should really be called the FUBAR code, and how claiming the full-service discount could actually increase a mailer's postage costs.

USPS: Ve Haf Vays of Making You Use Our Barcode: The Government Accountability Office (GAO) criticized the IM program as being unattractive to mailers. The USPS responded that huge penalties will coerce mailers into using the barcodes next year.

U.S. printers are hearing environmentally themed messages from both sides on the question of whether to buy Asian paper.

Ten North American environmental groups, including Greenpeace, the Sierra Club, and ForestEthics, issued a letter to various printers and paper buyers today asking them not to buy paper from Eagle Ridge Paper, claiming the merchant is a division of Asia Pulp and Paper (APP).

The letter claims that APP “is obtaining pulp and paper products from operations having adverse climate, human rights, and biodiversity impacts in Indonesia,” reports The Paper Planet. APP established Eagle Ridge as a front in the U.S., the letter adds, after APP “lost hundreds of millions of dollars in contracts” from such companies as Office Depot and Staples “because of its poor environmental and social record and its reported links to illegally obtained wood.”

Meanwhile, an APP-backed organization called Save Printer Jobs is urging U.S. printers to oppose anti-dumping penalties on coated paper from Indonesia and China. The U.S. Department of Commerce is scheduled to issue a preliminary ruling March 1on the case, which was brought by NewPage, Sappi, Appleton Coated, and the United Steelworkers union.

“A tariff on imported coated paper from China and Indonesia will hurt the U.S. printing industry” by driving up paper prices, the organization claims. “Higher costs will force many publishers to seek cheaper printing options in Canada and Mexico – or forgo printing some products all together.”

Save Printer Jobs also notes the “hypocrisy” of American mills claiming they are being hurt by government-subsidized Asian paper after the U.S. industry received about $9 billion in black liquor credits during 2009. NewPage and SAPPI received more than $400 million last year in black liquor credits, which critics claim is an abuse of a program that was intended to encourage production of new, environmentally friendly fuels.

“How can giant mills claim, with a straight face, that they are victims rather than perpetrators of market distortion?” Save Printer Jobs asks. “The giant mills and their hedge fund backers won’t give the taxpayers back their money from 2009, but it is not too late to stop their effort to slap an unwarranted tariff on imported paper that will raise costs for the printing industry and eventually drive U.S. printing jobs overseas.”

Some of the 10 organizations involved in today’s letter about Eagle Ridge have also opposed U.S. subsidies for black liquor, a pulp byproduct commonly used as a power source by pulp mills.

Monday, February 15, 2010

With so much confusion in the mainstream news media and Congress about black-liquor subsidies for U.S. pulp mills, it's time to set the record straight.

Many mis-statements emanated from Washington in the past week regarding how proposed jobs legislation would deal with black liquor, a pulp byproduct. Examples:

Reuters: The Democratic proposal "eliminates 'black liquor' tax break used by paper companies. Such companies have reaped big benefits from the credit, qualifying for it by blending a paper by-product known as "black liquor" with small amounts of diesel, which critics say was not the intention of the law."

Associated Press: "Many elements would be financed by a variety of provisions closing tax loopholes such as one enjoyed by paper companies that get a credit from burning a dirty pulp-making byproduct known 'black liquor' as though it were an alternative fuel."

Joint statement from the leading members of the Senate Finance Committee, Max Baucus (D-Montana) and Chuck Grassley (R-Iowa): "The provision would modify the $1.01 per gallon cellulosic biofuel producer credit to exclude fuels with significant water, sediment, or ash content, such as black liquor. . . . This proposal is estimated to raise $24 billion over ten years."

To set the record straight, black liquor is a byproduct of making kraft pulp, not of paper. (I'm not splitting hairs; there are companies that make paper but not kraft pulp and companies that make pulp but not paper.) Opposition to black liquor subsidies last year had to do with lack of "additionality" -- that is, the government shelled out billions to pulp mills for getting them to do what they would have done without the tax credits -- and the favoring of virgin pulp over recycled pulp.

There are two U.S. government programs at issue, alternative fuel mixture credits and the cellulosic biofuel producer credits. The former required a bit of diesel to be mixed with black liquor and resulted in an estimated $8 to $10 billion being given out to pulp and paper companies last year. The program expired Dec. 31.

Some versions of the jobs legislation would extend the alternative fuel mixture program while excluding black liquor. But, contrary to the Reuters article, even Congress isn't claiming that would save money, just prevent even more money from being given out for black liquor.

Below is the full text of a letter that Karl J. Simon, director of the Compliance and Strategies Division at the Environmental Protection Agency's National Vehicle and Fuel Emissions Laboratory, sent on Dec. 28 to Pam Blackledge of the Environmental Paper Network stating that black liquor does not qualify for the credits. You can click on the image above to see the letter, which was sent in response to a letter from 27 environmental groups opposed to Son of Black Liquor.

Thank you for your letter of December 4, 2009 expressing concern over alternative fuel tax credits being given for the use of black liquor from kraft pulp and paper mills and requesting that the Environmental Protection Agency (EPA) clearly state that black liquor is not eligible for the cellulosic biofuels producer credit.

The $1.01 cellulosic biofuel producer credit is a tax credit put in place by the 2008 Farm Bill and administered by the Internal Revenue Service. The act's language requires that among other things, in order to qualify as cellulosic biofuel, the fuel must meet "the registration requirements for fuels and fuel additives established by the Environmental Protection Agency under section 211 of the Clean Air Act (42 U.S.C 7545)." These registration requirements are applicable only to motor vehicle gasoline, motor vehicle diesel fuel, and additives for these fuels. Our understanding of black liquor is that it is a byproduct of the paper milling process with the consistency of molasses.

EPA has designated only motor vehicle gasoline and diesel fuels for registration. Based on available and limited information at this time, black liquor would not appear to be either a motor vehicle gasoline or diesel fuel. As a result, it does not appear that EPA would register black liquor as a fuel. Additionally, a manufacturer could pursue registering black liquor as a fuel additive. There is a series of requirements that apply if any applicant wishes to pursue registering a fuel additive. We do not have any application for registering black liquor as a fuel or fuel additive before us, and we are not aware of anyone intending to apply.

Again, thank you for your letter. If you have further questions, please contact Jim Caldwell of my staff at (202) 343-9303, caldwell.jim@epa.gov.

Wednesday, February 10, 2010

Senate Democrats started circulating a proposed jobs bill Tuesday that would be paid for partly by closing the "Son of Black Liquor" tax loophole. There are only three problems with that:

Congress never budgeted any money to pay for the loophole, so closing it would not reduce the federal budget.

The $25 billion in "savings" from closing the loophole are already supposed to be used to pay for the Democrats' stalled healthcare legislation.

An EPA official recently confirmed that the loophole doesn't actually exist.

A leaked draft of the "Hiring Incentives to Restore Employment Act" includes a provision intended to exclude black liquor from the new Cellulosic Biofuel Producer Credit program. It would block the eco-credits from being paid for any fuel consisting of more than 4% water and sediment or having an ash content of more than 1%.

Talk of a Son of Black Liquor loophole arose a few months ago because of an IRS ruling that black liquor, an energy-rich byproduct of the kraft pulping process, is indeed a cellulosic biofuel. The original black liquor loophole resulted in pulp and paper companies receiving $8 to $10 billion last year from the government without doing anything extra to help the environment.

With the CBPC being twice as generous and lasting for three years, the tab for Son of Black Liquor could theoretically exceed $50 billion. But an EPA official confirmed recently that black liquor does not meet a requirement for the program -- approval by the EPA as a gasoline or diesel fuel for motor vehicles.

"Based on available and limited information at this time, black liquor would not appear to be either a motor vehicle gasoline or diesel fuel," wrote Karl J. Simon, director of the EPA's Compliance and Innovative Strategies Division, in response to a coalition of 27 environmental groups. "As a result it does not appear that EPA would register black liquor as a fuel."

A manufacturer could request registration of a motor-fuel additive, but that has never been done, Simon wrote. Having, in Simon's words, "the consistency of molasses", black liquor is an unlikely motor-fuel additive. Pulp manufacturers derive value from black liquor by burning it to power their mills, not by using it in motors.

Still, brave Congress will probably try to slay the evil Son of Black Liquor and tell us how many billions that will save us. Here's how you can apply Congress' budgeting magic to your personal life: Suppose your budget is tight -- in fact, you're spending more than you are making -- and a neighbor hurts herself falling in your yard. You are concerned that you will have to pay her $25,000 in medical bills, but then learn you are not liable. Now you can use the $25,000 you saved to pay for a new car!

The jobs bill would also reinstate the "alternative fuel mixture credit" program that was the source of the original black liquor loophole but with language excluding "any fuel . . . derived from the production of paper or pulp."

Did Black Liquor Credits Pave the Way for Healthcare Legislation?: Senate Democrats apparently left the original black liquor loophole open as a favor to Sen. Olympia Snowe of Maine. The "Maine Squeeze" got far less press than the Cornhusker Kickback or the Louisiana Purchase that were also intended to line up votes for healthcare overhaul.

Tuesday, February 9, 2010

Mail volumes and the number of postal workers will shrink more slowly this year than in 2009, the U.S. Postal Service predicted today.

"The rate of decline in total mail volume has slowed, but we do not anticipate improvements for several more quarters," the USPS said in its quarterly financial report. "We expect advertising mail to stabilize and slightly increase as the economy improves."

The Postal Service's cost-cutting efforts include a plan to reduce work hours "by approximately 90 million" in the fiscal year that will end Sept. 30, which is less than the 115-million hour reduction in the previous fiscal year. One challenge to further cost reductions in general and the workforce in particular is the growth of delivery points. About 1 million new addresses have been added in the past year.

From October to December 2009, the number of mail pieces declined 9% and revenue declined 4% from the year-earlier period, the report said. That was an improvement from the previous 12 months, when volume declined 13% and revenue 9%.

Helped by a 9% reduction in career employees during calendar year 2009,USPS's cost reductions finally kept pace with its revenue declines. As a result, it lost "only" $263 million in the most recent quarter, versus a $380 million loss for October-December 2008.

But the fact that the Postal Service lost money even in what is usually its busiest quarter shows just how dire its financial situation is.

"Revenue is expected to continue to decrease in 2010 and, even with substantial cost reductions, our 2010 net loss is projected to be over $7 billion," the report said. Most of that projected loss is a $5.5 billion payment to a retiree-benefit fund that is nothing more than an accounting trick to make the federal deficit look smaller.

The Postal Service is scheduled to reveal next week its proposal to deliver mail one less day per week. But that won't have much impact on the current fiscal year.

"No significant savings are anticipated for 2010 from the proposed ability to adjust the six day delivery requirement, even if granted sometime during 2010, as multiple operational, contractual, and customer issues will need to be resolved before actual implementation of a five day per week delivery schedule," the report noted. "However, such important new flexibility could provide direct cost savings beginning in 2011."

Wednesday, February 3, 2010

Studying the fine print of tax legislation helped International Paper earn more than $2 billion last year in black liquor credits from the federal government.

The giant paper and packaging company announced today that it is getting $516 million in “alternative fuel mixture” credits for the 4th Quarter of 2009 and yet lost $101 million during the quarter. For the full year, IP got $2.06 billion from the government for mixing a bit of diesel fuel into its black liquor, a pulp byproduct, and using the mixture to power its pulp mills. Without the credits, it would have had a net loss of $1.4 billion last year.

IP kicked off the black-liquor craze in the U.S. pulp and paper industry a year ago when it revealed that it was exploiting a loophole in a federal highway bill. The law, which expired on Dec. 31, was intended to subsidize the use of bio-fuels in motor vehicles, but IP realized the subsidies could also apply to the decades-old practice of using energy-rich black liquor as a fuel source for kraft pulp mills.

Within a few months, all publicly traded companies with U.S. kraft mills were earning the credits. Most have not reported Fourth Quarter numbers yet, but they are on pace to receive more than $6 billion for 2009. With about one-fourth of the country’s kraft capacity owned by privately held companies, the total black-liquor tab for 2009 is likely to surpass $8 billion.

As we’ve noted before, we suspect Democrats in Congress left the black-liquor loophole open as part of a deal to help healthcare legislation. If so, they spent billions of taxpayer money and didn’t even get “two aspirins and a Band-Aid.”

Monday, February 1, 2010

Which is greener, getting news online or reading a newspaper? For environmental expert and activist Sarah Westervelt, the obvious answer is the printed newspaper.

“It doesn’t take electricity to read my paper,” she said in a video posted recently at PBS' Mediashift site. “I’m too informed about what’s going to happen to my computer when I’m done with it and too concerned about that” to rely on the Web for news.

“I try to rely on the really good bio-compatible materials that have been around a long time,” said Westervelt, who as e-stewardship director at the Basel Action Network has done much to expose the bogus “recycling” of toxic wastes from discarded electronic gadgets.

“If everybody stops reading newspapers then perhaps we stop growing trees,” Westervelt said during the video, which was taken from a discussion sponsored by USC Annenberg's Specialized Journalism Program. Among other participants in the discussion were the production directors of the San Jose Mercury News and Chronicle Books.

Westervelt didn’t claim that everything about printing and paper is environmentally friendly, noting that trees for paper are sometimes grown on single-species plantations. But those issues pale in comparison with the many toxic materials and “15 different plastics” typically found in computers, she said.

Unlike paper, computer components do not lend themselves well to recycling and reuse because “you have this really complex waste combined with not enough value in the materials to pay for responsible recycling,” Westervelt said.

“So what we have is companies that are presenting themselves as recyclers and really what they are is waste brokers. They are just consolidating, loading up shipping containers and it goes off to China or India or Pakistan. And it’s just having absolutely horrific impacts in a lot of these developing countries to both human health and the environment.”

For a briefer and more light-hearted defense of printed newspapers against the digital onslaught, check out this video of a male a capella quartet doing a fabulous take-off on Gnarls Barkley’s “Crazy”, with lines like "Does that make us crazy? Wanting you to read."

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